Key Takeaways:
- AI Product Expansion: Workday stock reflects platform expansion after January launches of AI-driven recruiting tools targeting frontline hiring across retail and services.
- Insider Activity Context: Workday stock absorbed January share sales by a 10% owner and a senior executive without altering core operating performance.
- Price Outlook: Based on 13% revenue growth, 32% operating margins, and a 17x exit multiple, Workday stock could reach $236 by January 2028.
- Upside Math: That target implies 35% total upside from the current $175 price, translating to roughly 16% annualized returns over 2 years.
Workday (WDAY) provides enterprise financial and human capital software, holding a strong competitive position across large organizations with a $45 billion market capitalization.
Last week in January, Workday expanded AI recruiting capabilities while reported insider share sales weighed on short-term investor sentiment.
Workday generated $9 billion in trailing revenue, reflecting sustained subscription demand across finance and HR platforms supporting recurring cash flows.
Workday generated about $2 billion profit with 32% operating margins, reflecting scale benefits as prior platform investments mature.
WDAY stock trades near $175 versus a $236 modeled value, highlighting tension between improving execution and restrained valuation.
What the Model Says for WDAY Stock
We analyzed Workday stock using assumptions tied to subscription scale, enterprise positioning, and improving efficiency across large customer deployments.
The model uses 12.5% revenue growth, 31.7% operating margins, and a 17.2x exit multiple.
That framework implies a $235.84 target price, representing 35% total upside and a 16.2% annualized return over 2 years.
Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for WDAY stock:
1. Revenue Growth: 12.5%
Workday delivered 16.4% revenue growth over the last year, supported by subscription expansion across large enterprises adopting unified finance and human capital platforms.
Revenue growth slowed from the 18.4% five-year pace as IT budgets normalized, though demand remains supported by long-term contracts.
Current execution is anchored by platform consolidation wins, AI-enabled modules, and expansion within existing customers rather than net-new logo acceleration.
Risks include slower hiring cycles and elongated deal approvals, while visibility improves through recurring revenue and backlog already under contract.
Consensus estimates assume 12.5% revenue growth, balancing durable enterprise demand against a more measured software spending environment.
2. Operating Margins: 31.7%
Workday’s operating margins improved to 24.0% over the past year, reflecting scale benefits as revenue growth outpaced sales and administrative cost increases.
Margins remain below long-term potential due to continued product investment, but recent quarters show clear progress toward sustained operating leverage.
Improving cloud infrastructure efficiency and lower incremental support costs support further margin expansion as revenue grows faster than fixed expenses.
Execution risk includes reinvestment needs and pricing pressure, though recurring subscription revenue supports predictable margin improvement.
In line with analyst consensus projections, operating margins at 31.7% reflect normalization toward scale economics without assuming aggressive cost reduction.
3. Exit P/E Multiple: 17.2x
Workday currently trades below historical five-year averages near 46.5x, reflecting investor caution following multiple compression across growth software stocks.
The exit multiple excludes a return to peak valuations seen during ultra-low interest rate periods.
Upside depends on sustained free cash flow growth and execution, while macro sensitivity continues to temper investor expectations.
Street consensus supports a 17.2x exit multiple reflecting normalized growth, steady margins, and cautious valuation sentiment.
What Happens If Things Go Better or Worse?
Workday’s outcomes depend on enterprise software demand, customer expansion depth, and cost discipline, creating varied execution paths through 2030.
- Low Case: If enterprise spending stays cautious and deal cycles lengthen, revenue grows around 11.1% with margins near 26.4% → 8.5% annualized return.
- Mid Case: With steady renewals, module adoption, and controlled costs, revenue growth near 12.4% and margins improve toward 28.3% → 15.3% annualized return.
- High Case: If AI-led upsell accelerates and scale efficiency improves, revenue reaches about 13.6% and margins approach 29.9% → 21.7% annualized return.
The $309 mid-case target price depends on consistent execution across renewals and margins, without requiring multiple expansion or market hype.
How Much Upside Does It Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
